The FII long-short ratio has slipped to just 15 percent, the lowest in the recent period. Historically, whenever the FII long-short ratio drops below the 15 percent mark, markets often witness a limited downside, according to Sudeep Shah, Head - Technical and Derivative Research at SBI Securities.
While the current data points to a clearly bearish stance by FIIs, the extremely low long-short ratio also suggests that much of the negativity might already be priced in, leaving room for a potential bounce if any positive trigger emerges, he said in an interview to Moneycontrol.
He believes NMDC, KIMS Hospital, and GMDC are likely to continue their northward journey in the next couple of trading sessions. "Despite of sharp upmove in the recent period, the momentum indicators are not in the overbought zone in case of KIMS Hospital, and GMDC," he said.
Given that the Nifty 50 has shown weakness for three consecutive weeks, do you expect it to break below the 20-week EMA (24,500) in the coming week, or is the worst behind us?
The benchmark index Nifty ended in the red for the third consecutive week, reflecting sustained bearish sentiment in the market. On the weekly chart, it has formed a bearish candle with a lower high and lower low structure — a classic indication of downward momentum. Throughout the week, the index made three attempts to reclaim its 20-day EMA but faced rejection on all three occasions. It is now trading decisively below the 20-day EMA, which has started to edge lower, further reinforcing the bearish undertone.
Additionally, the upward slope of the 50-day and 100-day EMAs has begun to flatten, signaling a potential loss of medium-term momentum. This slowdown in the EMA slope suggests growing indecisiveness and weakening strength among bulls. On the momentum front, the daily RSI is quoting at 43, marking its lowest level since April 2025. Moreover, the RSI is trading below its 9-day average, and both are in falling mode, indicating weakening internal strength and reinforcing the ongoing bearish setup.
Going ahead, Monday’s trading session will be crucial for the index as heavyweights are announcing their Q1 results from Friday's market closing and Saturday. The reaction to these earnings could provide near-term direction and either amplify the current trend or spark a reversal.
Talking about crucial levels, the zone of 24,940-24,900 will act as immediate support for the index as it is the confluence of the 50-day EMA level and 61.8% Fibonacci retracement level of its prior upward rally (24,473-25,669). If the index slips below the 24,900 level, then the next crucial support is placed at the 24,700 level. On the upside, the zone of 25,130-25,160 will act as an immediate hurdle for the index.
Does the recent gap-down opening in Bank Nifty indicate further downside? Could the index potentially break its June low?
The banking benchmark index, Bank Nifty, also extended its losing streak, ending in the red for the third consecutive week. On the daily chart, it witnessed a breakdown from a Rising Wedge pattern on Friday and also slipped below its 20-day EMA, which is a sign of growing bearish pressure.
A key technical observation lies in the daily RSI behaviour. Despite a mid-week pullback, the daily RSI failed to surpass the 60 level, which is a bearish sign as per RSI range shift rules. Currently, the RSI is quoting at 45, its lowest level since March 2025, indicating a notable loss of momentum and growing weakness in the trend.
Going ahead, the 50-day EMA zone of 55,950-55,850 will act as immediate support for the index. If the index slips below the 55,850 level, then the next crucial support is placed at the 55,300 level. On the upside, the 20-day EMA zone of 56,700-56,800 will act as an important hurdle for the index.
After a strong performance last week, including Friday's session, do you expect further upside in NMDC?
Yes, the NMDC is likely to continue its upward journey in the next couple of trading sessions. The stock has given a consolidation breakout on a daily scale along with robust volume.
What are your top two stock picks for the upcoming week?
The stock has given a consolidation breakout along with robust volume. Currently, all the moving averages and momentum-based indicators suggest strong bullish momentum in the stock. Hence, we recommend accumulating the stock in the zone of Rs 2,260-2,240 with a stop-loss of the Rs 2,170 level. On the upside, it is likely to test the level of Rs 2,400 in the short term.
The stock has taken support near the Rs 2,192 level and thereafter witnessed a sharp rebound along with relatively higher volume. Currently, the stock is trading above its short and long-term moving averages. The daily RSI is about to cross the 60 mark, and it is in rising mode. Hence, we recommend accumulating the stock in the zone of Rs 2,370-2,350 with a stoploss of Rs 2,280 level. On the upside, it is likely to test the level of Rs 2,500 in the short term.
Do you expect the higher highs and higher lows formation to continue in KIMS Hospital and GMDC?
Yes, considering the current chart structure, both stocks are likely to continue their northward journey in the next couple of trading sessions. Despite of sharp upmove in the recent period, the momentum indicators are not in the overbought zone.
Based on the recent data, do FIIs appear to be strongly bearish on the market?
In the cash segment, FIIs have offloaded equities worth nearly Rs 17,000 crore so far this month, indicating persistent selling pressure. Simultaneously, in the derivatives segment, the FII long-short ratio has slipped to just 15 percent, the lowest in the recent period. This reflects an aggressive build-up of short positions and a cautious near-term outlook from institutional investors.
However, it’s worth noting that historically, whenever the FII long-short ratio drops below the 15 percent mark, markets often witness a limited downside, as excessive pessimism tends to set the stage for short-covering rallies or a reversal in sentiment. While the current data points to a clearly bearish stance by FIIs, the extremely low long-short ratio also suggests that much of the negativity might already be priced in, leaving room for a potential bounce if any positive trigger emerges.
Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
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